The results of the elections to the eleventh Knesset were a draw between the right-wing - religious bloc and the left-wing - Arab bloc (60:60), and a national unity government was the only way out of the deadlock. Two such governments served during the term of the 11th Knesset - one headed by Shimon Peres and the second headed by Yitzhak Shamir.
The principle of rotation between the two was formalized in the coalition agreement. The work of the Knesset was influenced by the fact that more than three quarters of the members belonged to the coalition, and in order to enable the members of the opposition to fulfil their duties properly, certain changes had to be introduced in the Knesset rules and regulations. Shas - an ultra-religious Sephardi party - first entered the eleventh Knesset with four MKs. The election to the Knesset of the extreme Right-wing Rabbi Meir Kahane resulted in the amendment of several laws, the goal of which was to prevent lists which incite to racism from being elected to the Knesset. (See Basic Law: the Knesset.)
At the same opportunity it was also laid down that lists which reject the democractic nature of the State of Israel or its being the state of the Jewish people cannot be elected to the Knesset. One of the first issues dealt with by the National Unity Government and the Knesset was the economic crisis. To contend with the three digit rate of inflation and stabilize the economy, measures were taken that led to a sharp rise in unemployment, financial difficulties in many companies, kibbutzim, moshavim and private farms.
The Bejski Commission published its report on the manipulation of the bank shares by the banks, and the collapse of the market. The IDF was taken out of Lebanon, and intensive efforts were made to release the Israeli prisoners held by the terrorist organizations in Lebanon. One of the leftovers from Operation Peace for the Galilee was the libel suit brought by Minister Ariel Sharon against Time magazine.
In the course of th 11th Knesset the Order for the Prevention of Terror was amended, and all unauthorized contacts with the PLO and other terrorist organizations was prohibited. Terrorist attacks on individuals - such as the attack on the two hikers at Kremisan and the murder of the boy Rami Habba - as well as cases of arson, became more frequent. At the end of 1987 the intifada broke out.
Amongst the many issues which came up during the term of the 11th Knesset were the London Agreement between Shimon Peres and King Hussein; the Reagan Plan; the proposal that Israel introduce an autonomy plan in Judea, Samaria and Gaza unilaterally; the return of Taba to Egypt; the GSS affair which followed the No. 300 Bus scandal; the release of the members of the Jewish Underground; the Demjanjuk trial; the Pollard Affair; the problem of "deserters" amongst the Jews who left the Soviet Union with Israeli visas; the crisis in the health system, including the problem of black medicine; the issue of organ transplants; the problem of the "grey education," the construction of "Voice of America" transmitters in the Arava; and complaints of violence by policemen.
Sources: The Knesset